Britain craven in the face of despotism

'Magna Carta is such a Fellow he will have no sovereign,' snapped the Jacobean jurist Sir Edward Coke as he fought the arbitrary power of the Stuart monarchy. Lord Justice Moses and Mr Justice Sullivan might have lacked Sir Edward's succinctness, but last week they delivered a defence of the rule of law that was as stirring.

The Saudis' successful attempt to bully the Serious Fraud Office was a conspiracy to pervert the course of justice, they said, a conspiracy that, shamefully, the Blair government had joined. 'No one suggested to those uttering the threat that it was futile, that the United Kingdom's system of democracy forbade pressure being exerted on an independent prosecutor whether by the domestic executive or by anyone else. No one even hinted that the courts would strive to protect the rule of law and protect the independence of the prosecutor by striking down any decision he might be tempted to make in submission to the threat.'

Brave and undeniable, but Whitehall did have a cynical argument against the judges, though not one that would stand up in court. Saudi Arabia is a special case, it runs. Most despotisms are like Zimbabwe, nasty, corrupt and poor. Saudi Arabia is nasty, corrupt but fantastically rich because of its oil wealth. So when it threatens to cancel orders for Eurofighters or suspend co-operation in the war against al-Qaeda unless we obey orders, we can appease it, safe in the knowledge that the Saudi monarchy is a one-off. No one else has the strength to hurt our economy. No precedent is being set.

The judges noticed a knowing tone of voice behind the ministers' attempts to explain away the nobbling of the police investigation. Government lawyers seemed to be saying that Saudi Arabia was a regrettable anomaly whose 'threats were a part of life'.

But Saudi Arabia is no longer an anomaly and the way the world is moving, threats to the rule of law are going to become a far greater part of our lives.

Labour's more intelligent leaders know it. This year, David Miliband announced that the forward march of democracy had halted. The Foreign Secretary didn't just mean that countries such as Zimbabwe had sunk into thug-rule and penury. He meant the belief that societies could prosper only if they embraced representative government was vanishing. He could no longer reassure Aung San Suu Kyi and other dissidents that history was on their side.

Europe's most blatant example is Vladimir Putin's Russia. When its agents poisoned Alexander Litvinenko with polonium-210, the Russians were as astonished as the Saudis that Britain insisted on bringing alleged criminals to justice. 'I don't understand the position of the British government,' a foreign ministry spokesman spluttered. 'It is prepared to sacrifice our relations in trade and education for the sake of one man.'

From Leon Trotsky on, the Soviet regime has killed exiles. The difference between the old and the new Russia is that now Russia can buy the support of corporations and capitalists who will excuse their crimes.

In The New Cold War, his study of Putin's impact on Europe, Edward Lucas of the Economist argues that the Russian elite has understood that money can be used to undermine freedom because there are many in the West who believe that 'capitalism is a system in which money matters more than freedom'.

So it is proving. In Germany, Russian money now provides a lavish retirement job for Gerhard Schröder, who disgraced the honourable anti-autocratic tradition of German social democracy by taking the roubles of the Russian state energy giant. German conservatives are little better. So frightened is she of Russia's control of Germany's energy that Angela Merkel stops Georgia and other former colonies of the Soviet empire joining Nato and vetoes EU plans to free up the gas and oil markets. When the Foreign Office asked European allies for support after the Litvinenko assassination, Germany was the first to say Britain shouldn't take murder so seriously.

I could go on because it is always enjoyable being beastly to the Germans. The sad truth, however, is that among the developed democracies, Britain is the most anxious to prostitute its laws by offering near immunity from prosecution to dictatorial financial interests.

For instance, there are 20 Russian conglomerates on the London Stock Exchange, compared with just five in New York. Ken Livingstone explained why the City was the favoured destination for money not only from Russia but from autocracies the world over when he visited China in 2006. He told the regime's tycoons they wouldn't face irksome legal inquiries if they sent their profits to London. 'The Americans have overreacted to the Enron scandal and foreign executives are frightened of the new rules,' he explained. 'We want to tell Chinese businessmen that we will not put you in prison if someone down the management food-chain has forgotten to fill in a form correctly.'

So fraudsters enjoy a latitude in the City they don't enjoy on Wall Street. Why credulous voters continued to think Livingstone was left wing after that performance is beyond me, but his description of how the wealthy can escape legal interference was undeniable. The Saudis were outraged by the attention of the SFO because its investigators hardly ever threaten to prosecute. Even when they do, the courts don't back them up.

The 'light touch' regulation of the City Gordon Brown boasted about for so many years meant in effect that Britain profited from offering international finance a latitude it couldn't find in New York. We can't shake off our dependence on funny money, as Gordon Brown and David Cameron showed when they reacted to the judges' ruling by moving to curb the power of the judiciary to expose corruption and intimidation.

Coke's declarations are magnificent. So, too, are the brave sentiments of today's judges. But a more realistic appraisal was given by Jonathan Swift, who witnessed the founding of the City's money markets in the early 18th century and wrote: 'Laws are like cobwebs, which may catch small flies but let wasps and hornets break through.'

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